Poland, a country known for its rapid GDP growth and low unemployment rates, is facing significant challenges that could impede its economic prosperity. The dual pressures of an ageing population and severe labor shortages are creating a complex socio-economic landscape that requires immediate and strategic intervention.
The Ageing Population and Its Impact on the Pension System
Poland is one of the fastest-ageing countries in the European Union. The demographic shift is startling: the share of people above the age of 65 is expected to nearly triple, from 4% of the population in 2019 to 12% by 2060, with a sharp increase projected from 2040 onwards. This rapidly ageing population is putting immense pressure on the pension system, which currently does not adjust the retirement age in line with increasing life expectancy. Consequently, the benefits from the public pension system are expected to decline sharply in relative terms, leading to a rise in old-age poverty.
To mitigate these issues, Poland has introduced several reforms. Since June 2022, retirees have been allowed to continue working while drawing their pension benefits, and a supplement has been added to match the general old-age minimum pension. These measures aim to reduce the incentives for early retirement and encourage the workforce to remain active for longer. Additionally, the 2022 'Polish Deal' reform included measures to reduce the tax burden for those who delay retirement, aiming to incentivize continued participation in the workforce. Yet, as Poland’s population ages, the fundamental issues within the pension framework remain unresolved.
Labor Shortages: A Growing Concern
Despite its robust economic performance, Poland is grappling with severe labor shortages, particularly in sectors crucial for the green transition. In 2022, labor shortages were reported in 33 occupations requiring specific skills for the green transition, including plumbers, pipe fitters, roofers, and electricians. These shortages are not just an inconvenience but a significant constraint on production and construction. In 2022, labor shortages were a limiting factor for 63.4% of firms in the industry and 74.6% in construction.
The job-vacancy rate has also seen a notable increase across key sectors such as construction and manufacturing. In construction, the vacancy rate rose from 1.0% in 2015 to 2.5% in 2021, while in manufacturing, it increased from 0.6% to 1.1% over the same period. Although these figures are still below the EU average for vacancies in these sectors, the trend is concerning.
The root causes of these labor shortages include Poland's low fertility rates and an ageing population. Over the past 30 years, the birth rate has decreased by 40% and currently stands at 1.33. The country's statistical agency forecasts that the population will continue to shrink in the coming decades, with the number of people of working age expected to decrease by at least 7 million between 2023 and 2060.
Strategic Responses and Future Outlook
To address these challenges, Poland must focus on upskilling and reskilling its workforce, particularly in areas critical for the green transition. Promoting inclusive labor markets is essential to accelerating the transition to a net-zero economy and ensuring its fairness. In the first quarter of this year alone, Polish employers reported 112,000 job vacancies that could not be filled despite active recruitment efforts. Estimates suggest that Poland's labor shortage could reach up to 1.5 million workers by 2026.
Poland's ability to navigate these demographic and labor market challenges will determine its future economic prosperity. Strategic policy interventions focusing on extending working lives, enhancing workforce skills, and creating a more inclusive labor market are imperative. By addressing these issues head-on, Poland can ensure sustainable economic growth and social stability in the years to come.
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